Charles Plosser: Inflation Numbers Are Noisy

Philadelphia Federal Reserve Bank President Charles Plosser spoke with FOX Business Network’s (FBN) Peter Barnes about the economy. Plosser spoke about inflation saying, “I’m not worried about it in the short run.” When asked whether there are any bubbles out there Plosser said, “I think bubbles are very hard to identify, particularly in advance” and that “we don’t have a great track record with that, but what I would say volatility is low.

Charles Plosser on whether he is worried about inflation:

“I’m not worried about it in the short run. And we actually look at many inflation indicators. Our target is set in terms of this PCE deflator, you’re right…the CPI is relevant and other measures. We look at all those. And I think that many of us in the Fed, in the statements, have been suggesting that we believe that while we’ve had a period of somewhat lower than target inflation, we expect it to drift back up toward our target. And so the last few months, both the PCE and the CPI have been drifting back up toward our target. We’re not there yet, but I think that’s encouraging that it’s stabilizing and moving back toward our target. And that’s a good thing.”

Charles Plosser on whether the inflation numbers are noisy:

“All data is noisy, I mean, so…but I think we have to take the numbers kind of at face value and, yes, the rise in the CPI may pull back a little bit. It may not continue. We don’t know the answer to that… So we have to be vigilant and careful and look at all the number that we can.”

Charles Plosser on whether he is seeing any new bubbles:

“I think bubbles are very hard to identify, particularly in advance. We’re – we don’t have a great track record of that. But I would say volatility is very low. There are things that the Fed is watching. We are concerned about that. As I said, we’ve had zero interest rates now for five and a half years. We’ve never done that before. What are the unintended consequences of that going to be? And we need to be alert to that possibility and be rather attuned to and sensitive to the prospects that that long period of zero interest rates could have unintended consequences.”

Charles Plosser on when he expects the Federal Reserve to start raising funds:

“I don’t know when it will happen, obviously. But I do think thinking in terms of the calendar is the wrong way. What’s going to happen is the data are going to tell us when it’s time. So using data and we often say we’re data dependent, and we’ve said we will adjust our lift-off as we get closer to our goals, make progress toward our goals. We’re doing that. And so we need to recalibrate, I think, at some point in the not too distant future about how we’ll make the decision to lift-off.”